Research on the Compensation Incentive System of Independent Directors in Chinese Listed Companies

Abstract

The independent director system is one of the important components of modern corporate governance. The huge liability of independent directors in the Kangmei Pharmaceutical case in 2021 has once again become a hot topic of discussion. In the exploration of the causes of the failure of the independent director system, the motivation of independent directors to perform their duties and their incentives are also worth considering. Based on the relevant theories of independent director incentives, this paper conducts a comparative analysis of the incentive models of independent directors in China and other countries and concludes that the legislative level of incentives for independent directors in China is relatively low, and the remuneration forms, standards, and payment subjects are unreasonable and lack implementation. In addition, the establishment of independent directors’ associations and the gradual construction of independent directors’ reputation incentives were proposed.